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Interest rates: Will the Fed signal a boost?

Interest rates were supposed to be kept low by the Federal Reserve's bond-buying program. Ben Bernanke will meet with the press on Wednesday, and investors will listen for clues about when the Fed might change its policy with interest rates.

By Jeannine AversaAssociated Press / April 27, 2011

US Federal Reserve Chairman Ben Bernanke (L) and Treasury Secretary Timothy Geithner (R) take their seats at the International Monetary Fund and World Bank Spring Meetings at IMF headquarters in Washington, April 15, 2011. Bernanke will hold the first quarterly news conference for the Federal Reserve on Wednesday, and he may indicate when the Fed will start to boost interest rates.

Jonathan Ernst / Reuters / File

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WASHINGTON (AP) — The door at the notoriously secretive Federal Reserve is opening wider.

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For the first time in the Fed's 98-year history, its chairman is to begin holding regular news conferences. For Ben Bernanke, Wednesday's meeting with the press gives him a chance to steer the debate about where hiring, economic growth and inflation are headed in the months ahead.

It also helps the chairman cast himself as open and accessible, eager to answer questions.

Investors will be looking mainly for clues about when the Fed will reverse course and begin boosting interest rates.

When their two-day meeting ends Wednesday, before the news conference begins, Bernanke and his colleagues are expected to signal that the Fed's $600 billion Treasury bond-buying program will end as scheduled in June.

The bond-buying program was intended to keep interest rates low, encourage spending and boost growth. But critics say increased spending has raised the risk of high inflation.

Since the Fed announced the economic-support program in November, the economy has improved. Unemployment has fallen to 8.8 percent. And the private sector over the past two months has embarked on its biggest hiring spree in five years.

But a spike in oil and food prices has pushed inflation up. That's sparked a debate within the Fed about when to start raising rates and take other steps to soak up the money pumped into the economy during the recession.

A vocal minority, including the Fed regional chiefs in Philadelphia and Minneapolis, say the Fed may need to raise interest rates by the end of this year to fight inflation. The central bank has kept its benchmark interest rate near zero since December 2008.

And Richard Fisher, president of the Federal Reserve Bank of Dallas, argues that the Fed should consider halting the bond-buying program now, not in June.

The majority — including Bernanke, vice chairwoman Janet Yellen and William Dudley, president of the Federal Reserve Bank of New York — say interest rates should stay low longer, and the bond-buying program should run its course.

Bernanke has predicted that the jump in oil and food prices will cause only a brief increase in consumer inflation. Excluding those prices, which tend to fluctuate sharply, inflation is still low, he has argued.

So far this year, Bernanke has managed to forge consensus for his policies. All the Fed's decisions this year have been unanimous. But the deepening divides could make Bernanke's job harder.

The latest policy announcement is expected around 12:30 p.m. EDT (1630 GMT). Less than two hours later, Bernanke will make history and hold the first of three news conferences this year. Seated at a wooden desk, he will field questions for around 45 minutes.